Tony and Jeannie Nelson are married and file a joint return. They have four children whose ages are: 5,17,19 & 23. The two youngest live at home all year with their parents and qualify as their dependents. The oldest Roger got married on 5/5 2023 and lives with his wife, Jane. The 19-year-old Tabitha is a full-time student working towards her bachelor's in fine arts at Savannah College of Art & Design. She lives in Savannah, GA. during the academic year and returns to her parents' home during breaks. Tony and Jeannie provide you with the following information regarding their upcoming 2023 tax return: 1) Tony Nelson is an aerospace engineer he runs an engineering firm, Nelson Engineering (NE), as a sole proprietorship since 2010. a) NE has very lucrative contracts with numerous aerospace companies and during 2023 it will earn $647,000. b) NE rents an office downtown where they meet with clients and conducts business. The rent includes all utilities. NE will pay $36,000 in rent expense for 2023. The landlord offered to maintain the same yearly rent cost and Tony could receive an additional month's rent for free if he prepays his 2024-year rent in advance. Tony has agreed and will pay an additional $36,000 on December 1, 2023, to cover January 2024 through January 2025 rent. c) NE obtained a business loan from SunTrust Bank and paid $2,500 in prepaid interest for July 1, 2023, through June 30, 2024. d) NE has a few employees, including an electrical engineer, a part-time engineering intern and an office manager. The combined wages for these employees will be $221,000. Payroll taxes for these employees is estimated as $18,000. e) Tony took different business clients to see several home Miami Heat games during January and February of 2023 followed by dinners at nearby restaurants where business was discussed. The meals were not considered lavish. The total cost for the Heat tickets and accompanying meals were $1,400 and $700, respectively. f) In April 2023, Tony flew to a two-day engineering convention held in Phoenix, AZ requiring a two-night hotel stay. While there, Tony noted that the convention dress code was business formal when he thought it would be casual. Tony immediately purchased a business suit for $400 (not considered lavish) at a nearby department store. All food costs were covered by the convention organizers. Other trip costs that Tony paid were airplane ticket $480 and hotel lodgings cost $160ight for two nights. g) The depreciation for the year on the fixed assets owned by NE are estimated to total $4,500. h) All of NE's business transactions are properly documented and supported by receipts/invoices. In addition to deductible portion of the items listed above the business will have an additional $3,800 of deductible other expenses.

2) Jeannie Nelson is an artist; she works part-time teaching art 2 days a week at a magnet art school in their town. She earned $12,000 in salary from Cocoa Beach, School of the Arts, the following items were withheld from her gross wages, $1,200 federal income taxes, $120 state income tax, $744 social security, and $174 Medicare. She is not covered under their insurance plan as she only works 15 hours a week. She also volunteers 5 hours a week with the Girl Scouts of America as an art instructor. 3) Jeannie is known for beautiful Arabian influenced abstracts. During May and August of this past year she had a virtual exhibition and sold paintings at each event. She estimates that the cost of each painting in canvas and supplies is about $425. a) The sales are as follows: i) May - 19 paintings for a total of $ 24,000 ii) August - 12 paintings for a total of $ 18,000 b) She paints in a studio located in a separate building on the property of their home. The expenses related to the studio allocated based on square footage are as follows: i) Depreciation $3,600 ii) Taxes $1,900 iii) Utilities $3,400 4) The Nelsons who utilize the specific identification method for valuing their investments to minimize gains, had the following assets/investments activities occur during this year: a) 4/5/2023 sold for $20,000 common stock in York Co. that was purchased for $14,000, on 2/14/2009, The shares of York Co are qualified small business stock under 1202. b) 7/1/2023 sold 200 shares of common stock in New Co. for $17,000. They had purchased 100 shares on 8/7/2017 for $6,500 and 200 shares on 8/7/2018 for $ 15,000. c) 9/15/2023 sold 150 shares of common stock of City Co for $14,000 total that were purchased for $19,500 on 3/18/2023. d) 8/5/2023 sold for $28,000 antique coins that Jeannie inherited from her great-aunt on January 16, 2023, when its FMV was $26,500. Her great aunt had a basis in the coin of $2,000. e) 10/1/2023, they sold a portion of a parcel of land with a small building for $62,000 that had a basis of $23,000 and was purchased in 2003. $25,000 of the gain is unrecaptured 1250 property. f) 8/15/2023 sold stock in Space Explorers Inc. for $31,500 that they had purchased on 8/14/2016 for $18,000. g) The Nelsons have a Long-term loss carryover of $14,000 from 2022. h) Interest income earned from their various accounts is a total of $1,400. None of these amounts are related to municipal bonds. 5) On April 13 of 2023, the couple paid their $1,500 in state taxes due with their 2022 state tax return. They paid state income tax for 2023 of $4,200. The couple's estimated state and local sales taxes for 2023 will be a total of $2,800. The property taxes paid on their principal residence for 2023 is $7,600, excluding any amounts allotted to the artist studio. 6) On October 1st they donated a parcel with a separate small building to the Girl Scouts of America for use as an art studio. They had purchased the acres in 2003 and recently divided a portion for sale (see 4e above). This portion has a basis of $41,500. A professional appraiser determined the fair market value of the property was $92,000 on September 24th of 2023. 7) This year the Nelsons had several medical expenses not reimbursed by insurance these are as follows: a) Tony & Jeannie both received corrective eye surgery, at a total cost of $ 6,000 b) $ 3,200 for braces for the 12-year-old c) $ 2,600 in co-payments for covered medical procedures. d) $ 700 in payments for over-the-counter medications. e) $2,500 at the urgent care clinic for Jeannie's brother Sam who hurt his back helping her set up the art exhibits in May. He is not their dependent. f) They pay $8,800 in health insurance premiums to cover the family. 8) The Nelson's spent $ 16,200 in home mortgage interest on their original acquisition cost of $800,000 from 2015. They do not have any additional mortgage debt. 9) The Nelson's spent $45,000 for Tabitha's tuition at SCAD, $3,200 books, and supplies and $10,000 for room and board. 10) The Nelsons paid quarterly estimated tax payments of $21,000 per quarter, based on their 2022 liability which was a total of $84,000. Based on their 2022 income of $280,000 the Nelsons did not receive any of the stimulus check

Tony & Jeannie Nelson Summary of Tax Return 2023 Description Amount Subtotal Totals Explanation/Computations as needed Salary & Wage Income I:I Net Income from Nelson Enginee| Net Income from Jeannie Art Interest Income S/T Capital Gains Other Ordinary Income Ordinary Income L/T Capital Gains 28% L/T Capital Gains 25% L/T Capital Gains 0/15/20 Other Income, if any Total Gross Income Adjustments (deductions FOR AGI): Total Adjustments FOR AGI Adjusted Gross Income Itemized or Standard Deduction Qualified Business Deduction Total Deductions FROM AGI Taxable Income 1 Ordinary Taxable Income L/T Capital Gains 28% L/T Capital Gains 25% L/T Capital Gains 0/15/20 Taxable Income 1] [ -] Tax on Ordinary Income Tax on LTCG 28% Tax on LTCG 25% Tax on LTCG 0/15/20 Tax on Taxable Income Other Taxes: Net Investment Income Tax Self-Employment Tax Additional Medicare Tax Total Other Taxes Total Tax Credits: Child Tax Credit American Opportunity Tax Credit Total Credits Prepayments Total Credits & Prepayments Amount Due [Refund) Item Description Revenue Cost of Goods Sold Gross Profit Business Expenses: Wages Rent Expense Taxes Utilities Depreciation Interest Travel Entertainment Meals Other Expenses Total Expenses Net Business Taxable Income (Loss) Self Employment Tax Deduction Tony & Jeannie Nelson Nelson Engineering 2023 Amount Hm Explanation/Computations as needed Tony & Jeannie Nelson Jeannie Abstracts Item Description Revenue Cost of Goods Sold Gross Profit Business Expenses: Wages Taxes Utilities Depreciation Other Expenses Total Expenses Net Business Taxable Income (Loss) Self Employment Tax Deduction 2023 Amount H Explanation/Computations as needed Tony & Jeannie Nelson Sale of Assets 2023 Short Term . . Net Gain Capital Long Term Capital Gain/(Loss) Items Proceeds Cost (Loss) Gain/(Loss) 28% 25% 0/15/20 Explanation/Computations as needed g Carryover Total Gain / (Losses) Steps 1 & 2 Netting Steps and Adjustments: NET GAIN (LOSSES) - S . - - |NET GAIN (LOSSES) to Summary sheet .I Item Description Amount Medical Deduction Total Expenses Medical Expense Deductible Taxes Paid Total Expenses Tax Expense Deductible Interest Paid Total Expenses Interest Expense Deductible Charitable Contributions Total Expenses Charitable Contribution Deductible Other Itemized Deductions Total Expenses Other Deductible Total Itemized Deductions Standard Deduction I Amount Deductible Tony & Jeannie Nelson Itemized Deductions Subtotal 2023 Total | | | I Explanation/Computations as needed Tony & Jeannie Nelson Qualified Business Deduction Calculation 2023 Explanation/Computations as needed Qualified business income (QBI) from Nelson Engineering W-2 Wages for this activity Qualified Property (investment) for this activity Qualified business income (QBI) from Jeannie Abstract W-2 Wages for this activity Qualified Property (investment) for this activity Taxable Income before QBI Deduction Wage based Limitation Taxable income before QBI and pref rates threshold Qualified Business Income Deduction: Lesser of: QBI Calculation a) QBI from Nelson Engineering QBI from Jeannie Abstract Rate 20% Total QBI or Taxable Income Limitation b) Taxable Income before QBI Deduction Capital gains Excess of income over capital gains Rate 20% Wage Based Limitation on QBI: Applies Yes or No If Yes then compute below: Greater of: Nelson a) 50% of wages b) 25% of wages + 2.5% of qualified propert Greater of: Jeannie a) 50% of wages b) 25% of wages + 2.5% of qualified propert Amount of QBI DeductionTony & Jeannie Nelson Tax Calculations 2023 Income TAX Explanation/Computations as needed Tax on Ordinary Income $ Bracket Excess S Marginal Rate % Tax on Excess S Total Tax on Ordinary Income L/T Capital Gain 28% Max Capital Gains Rate 28% Capital Gains Tax L/T Capital Gain 25% Max Capital Gains Rate Capital Gains Tax L/T Capital Gain 0/15/20% 0 Capital Gains Rate Capital Gains Tax Net Investment Income NIIT Rate 3.8% Net Investment Income Tax Self Employment Tax TotalIncome Nelson Ena Taxable Computation. 92.35% Self Employment Taxable Social Security Taxable Rate 12.4% Social Security Tax Medicare Taxable Rate 2.9% Medicare Tax Self Employment Tony TotalIncome Jeannie Abstract Taxable Computation. 92.35% Self Employment Taxable Social Security Taxable Rate 12.4% Social Security Tax Medicare Taxable Rate 2.9% Medicare Tax Self Employment Jeannie Total Self Employment Tax Extra Medicare Tony SE Taxable Jeannie SE Taxable Jeannie Salary TotalS E Taxable Extra Medicare MFJ Floor Amount Subject to extra Extra Rate 0.9% Extra Medicare TaxTony & Jeannie Nelson Tax Credits 2023 Child & Dependent Tax Credit Explanation/Computations as needed # of children eligible for credit credit per child amount # of other dependents Per other dependent credit amount Total Child Tax Credit before phase-out Adjusted Gross Income (AGI) Phase-out threshhold AGI In Excess of threshold Credit Phase-out Increment Amount of Credit Phase-out Net Child Tax Credit Total Net Child Tax Credit on Return American Opportunity Tax Credit Amount of eligible expenses Amount of credit before phase-out Adjusted Gross Income (AGI) Phase-out threshhold AGI In Excess of threshold Phase-out range for MFJ Phase-out % Amount of Credit Phase-out Net American Opportunity Tax Credit